The IRS Wants its Money

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If an employer mishandles payroll-related responsibilities and fails to forward the correct amounts of withheld taxes and matching contributions, the IRS will seek recovery and penalties.

And the IRS doesn’t care where the money comes from. If the business owner or the corporate entity doesn’t have the money, the IRS will do its best to get it from the individual or individuals who were responsible for the payroll-related duties.

How can workplace leaders have a personal risk in payroll obligations? Isn’t it the responsibility of the business? It’s because specific laws and court decisions interpreting laws have put obligations on employers and then extend the obligations to agents of the employers. When executives, managers, supervisors, and other employees make decisions and take actions involving employees… they can be considered agents.

The Internal Revenue Code gets even more specific. Section 6672 reads: “Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.”

To make matters worse, the IRS can go after and collect unpaid payroll taxes from as many people as it finds liable. In other words, even if one person has already paid the debt, the tax agency can collect it again from one or more other responsible individuals.